Valued at $18 billion and backed by BAT players: Kuaishou can no longer afford to wait as Keling goes independent?

$3 billion in financing, $18 billion post-money valuation, 34 investors.

This set of figures points to the final independent financing outcome of Kuaishou Kuaishou Keling AI. On July 2, Kuaishou announced that Keling AI had completed its independent spin-off financing, with a post-money valuation of $18 billion and a maximum financing amount of $3 billion, with Tencent, Alibaba, and Baidu all participating as investors.

Two months prior, market rumors had pegged the valuation at $20 billion with a $2 billion financing round. The final deal saw a reduced valuation but an increased financing amount. Kuaishou refrained from clinging to that higher valuation figure.

Because Keling couldn't afford to wait, and neither could Kuaishou.

In March 2026, Sora was officially shut down. The name that once electrified the global AI video sector ultimately exited the market due to commercialization failure.

The domestic three-way rivalry only intensified, with ByteDance's Seedance 2.0, Alibaba's HappyHorse, and Kuaishou's Keling occupying the top three spots in global video generation model rankings. Competition has shifted from whose technology is more impressive to who can achieve sustained profitability.

Meanwhile, Kuaishou's revenue growth rate slid to 3.4% in the first quarter of 2026, while full-year AI capital expenditure is projected to reach 26 billion yuan. Keling's annual revenue accounts for less than 1% of Kuaishou's total revenue; remaining within the group would dilute its valuation and render its financial model unviable.

Spin-off became a more realistic choice. By moving Keling from an internal business to the independent financing track, Kuaishou avoided rushing into a quick spin-off and hasty listing, instead playing a safe strategic card.

Through this financing, Keling has secured an independent valuation system and the resources to operate independently, while Kuaishou retains control over Keling. This represents a critical move to reduce financial burdens and restructure valuations.

With this safe play, Kuaishou is managing the pace to buy more room for growth. Ultimately, how large that room can be depends on what kind of results Keling can deliver on its own.

BAT All In: Kuaishou Keling Plays the Safe Card

Tencent, Alibaba, and Baidu—the three giants of China's internet—when was the last time they sat at the same investment table?

The answer to that question is somewhat blurry, but in this round of Keling's financing, the three are clearly all present.

On July 2, 2026, Kuaishou Technology announced on the Hong Kong Stock Exchange that its independently operated entity, Beijing Keling, would conduct a capital increase and share expansion at a pre-money valuation of $15 billion, introducing up to $3 billion in external investment, resulting in a post-money valuation of approximately $18 billion. Among the investors, Tencent and Alibaba Cloud each contributed 1.363 billion yuan, while Baidu contributed 341 million yuan.

There are a total of 34 investors. CPE Yuanfeng and Guofang Venture Capital led the investment, followed by national and local industrial funds including the China Internet Investment Fund and the Beijing Artificial Intelligence Industry Investment Fund. Lightspeed Capital served as the exclusive financial advisor. With this, Keling AI has set the record for the largest financing amount ever raised by a global video foundation model company to date.

This result stands in stark contrast to market rumors from two months earlier. In May 2026, LatePost reported that Kuaishou planned to spin off Keling AI at a $20 billion valuation and raise approximately $2 billion in financing.

When the news broke, Kuaishou's market capitalization was less than $29 billion. As a business accounting for just 1% of revenue, Keling's valuation was approaching 70% of its parent company's market cap, sparking widespread controversy.

On May 12, Kuaishou issued an announcement stating that its board of directors was evaluating plans to restructure Keling AI's assets and operations. It did not respond to specific post-money valuation or financing details at the time.

Now, Keling's financing cap has been raised from the rumored $2 billion to $3 billion, while its valuation has adjusted from $20 billion to $18 billion. Behind this shift is Kuaishou's re-evaluation of Keling.

In terms of equity control, after the full completion of the financing, Kuaishou will hold a total of 68.33% of Keling's shares through multi-layered holding platforms. Combined with a 15% employee equity incentive pool, external capital accounts for only 16.67%. Kuaishou maintains absolute controlling interest, and Keling's financial statements continue to be consolidated into the listed company, with no asset divestment or off-balance-sheet business separation.

More noteworthy than the financing amount and equity division are the restrictive conditions behind the transaction, through which Kuaishou has provided Keling with a sufficient safety net for independent operations.

Kuaishou didn't rush Keling into battle immediately after independence, but instead gave it nine months of preparation time.

The announcement requires that Kuaishou's Keling R&D and operation subsidiaries scattered across different regions complete integration within nine months after the final capital increase payment, divest non-AI video businesses to the parent company, transfer all models, qualifications, and overseas operating entities to Beijing Keling, and simultaneously complete full regulatory approvals for AI algorithm filing, value-added telecommunications licenses, and outbound investment (ODI) procedures.

More critically, Kuaishou has promised investors a five-year non-compete agreement.

After the restructuring is completed, until Kuaishou ceases to hold a controlling stake in Keling or five years pass (whichever comes later), the Kuaishou Group will not directly or indirectly control any entity primarily engaged in video generation model business. This effectively means Kuaishou is betting its entire video generation AI sector on Keling, and will not launch competing operations for five years. For investors, this is a clear signal that the parent company's resources will not be dispersed, and Keling is Kuaishou's only chip in the AI video track.

Notably, Kuaishou hasn't just paved the way for Keling—it has also signed a performance commitment agreement, since capital would never buy into an AI story at such a high valuation unconditionally.

Kuaishou plans to launch Keling AI's Hong Kong stock listing process within the next 12 months, targeting the submission of application materials in early 2027. The capital increase agreement sets clear exit fallback clauses: if Beijing Keling fails to complete its IPO by October 30, 2031, or cannot complete all restructuring-related regulatory procedures within nine months, investors have the right to demand the company repurchase their equity at an 8% annual simple interest rate.

This means Keling has a clear listing timeline, must complete its IPO within five years, or face real money repurchase pressure. The $3 billion in funds does not come for free—every cent carries a time cost.

From $20 billion to $18 billion, the reduced valuation figure is exchanged for $3 billion in operating funds and five years of buffer time, but it also comes with a listing commitment that must be fulfilled within five years.

From Storytelling to Number Crunching: Keling Stands at a Crossroads

With the $18 billion valuation on the table, whether Keling can justify this valuation and deliver on its IPO promise ultimately comes down to its business performance.

To answer that question, it's worth first examining how Keling is currently performing.

Keling has indeed been treated as a "beloved child" within Kuaishou. From being an internal AI lab project, to being upgraded to a first-tier independent division, to becoming a leading player with the largest single financing in the industry, Keling has completed in just two years the journey that most AI startups take three to five years to traverse.

Keling's level of importance within Kuaishou has also continued to rise. In 2025, Kuaishou CEO Cheng Yixiao stated that he would strive for Keling to become the world's top video generation AI application in terms of revenue scale. In 2026, he set a military order to achieve "over 100% year-on-year revenue growth for Keling". During this year's March earnings call, Cheng Yixiao defined Keling as the "second growth curve".

Following closely behind Sora and breaking through in the fiercely competitive AI video sector, Keling's success relies not only on Kuaishou's support but more crucially on its differentiated path.

Back in early 2024, when the industry was generally observing Sora's development pace, Keling judged that OpenAI's core resources would prioritize language models, leaving a window of more than half a year for video productization. Keling went all-in on the DiT architecture, eventually launching the world's first user-accessible DiT video generation model.

Differing from overseas models that favor cinematic long videos and deviate from commercial scenarios, Keling leverages Kuaishou's massive native short-video training data to build a differentiated advantage. Its models are better adapted to generating short videos for daily life, e-commerce product showcases, and live stream clips, bringing them closer to the needs of creators and merchants.

Image source: Keling official website

This allowed Keling to quickly establish a growth trajectory. According to unaudited financial data disclosed in Kuaishou's announcement, Keling's total revenue in 2025 was 1.1 billion yuan, and its revenue in the first quarter of 2026 alone exceeded 650 million yuan, representing a year-on-year growth rate of over 300%. Its annual recurring revenue (ARR) climbed from $240 million in December 2025 to $500 million in March 2026, marking a half-year increase of over 108%.

In terms of industry narrative, Keling has already proven the viability of AI video commercialization. Unlike most lab models that can only demonstrate technical demos, Keling has simultaneously opened up two monetization paths: C-end paid subscriptions and B-end enterprise services, transforming foundation model technology into commercially viable products. After Sora's shutdown, it became one of the few general-purpose video generation foundation model enterprises globally with stable revenue streams.

From another perspective, Keling cannot afford to rest easy—while it generates revenue, it also burns through significant capital.

Financial data shows that Keling's net loss in 2024 was 500 million yuan, and the loss expanded to 1.9 billion yuan in 2025, with a cumulative loss of 2.4 billion yuan over two years. By the end of 2025, Beijing Keling's total assets were only 244 million yuan, total liabilities reached 253 million yuan, and its net assets were negative 9 million yuan, indicating a short-term insolvent status.

Computing power costs for AI video are unavoidable rigid expenses. To achieve cost reduction and efficiency gains, adjustments to the revenue structure are typically necessary. Currently, approximately 70% of Keling's revenue comes from C-end subscriptions, while the B-end API proportion remains relatively low. The C-end subscription ecosystem carries high uncertainty—once ByteDance's Jimeng and Alibaba's HappyHorse launch cheaper or even free tools, Keling's revenue in this segment could easily be eroded.

Additionally, Keling's revenue proportion is too low to meaningfully support its parent company. In 2025, Kuaishou's total annual revenue reached 142.8 billion yuan, with Keling accounting for less than 1% of the group's total revenue. Even with its current ARR of $500 million, projected full-year revenue of 3.4 billion yuan would still account for less than 3% of Kuaishou's expected revenue. In the short term, it cannot offset the group's overall AI investment through its own profitability, and the contradiction between high investment and low revenue contribution persists.

The mismatch between costs and revenues may have accelerated Keling's independence. Sora's lesson has already drawn the survival line for the industry—models that cannot control computing power costs or achieve stable commercial revenue will eventually be eliminated by capital and the market.

Sora's shutdown represents both an opportunity and a wake-up call for Keling. The AI video sector has shifted from a technology race to a commercialization race. Although Keling's ARR has reached $500 million, the reality of 2.4 billion yuan in losses over two years cannot be ignored.

More importantly, old rivals have switched camps, and new competitors are advancing aggressively. ByteDance's Seedance 2.0, released in February 2026, quickly gained popularity and continues to divert users in the C-end creator market through its ecosystem traffic. Alibaba's HappyHorse, developed by Zhang Di, Keling's former technical lead, targets corporate advertising and e-commerce merchants, seizing B-end market share.

Under intense competitive pressure, Keling must break out of Kuaishou's single short-video ecosystem and expand cross-platform, industry-wide clients to unlock its commercialization ceiling. Independent financing and operation are the inevitable paths to breaking free from ecosystem constraints.

On both sides of the $18 billion valuation scale, Keling stands at a crossroads. On one side is an annualized revenue expectation of $500 million; on the other, cumulative losses of 2.4 billion yuan over two years. On one side is its technical position in a three-strong landscape; on the other, the industry warning of Sora's collapse. Where to go next, how fast to move, and how to become profitable—these are questions Keling must answer with tangible results.

AI Video Enters the Performance Period: Kuaishou Has No Choice But to Spin Off

It's not just Keling that stands at a crossroads, but its parent company Kuaishou as well.

In full-year 2025, Kuaishou achieved total revenue of 142.8 billion yuan, a year-on-year increase of 12.5%, with full-year adjusted net profit reaching 20.6 billion yuan.

However, in the first quarter of 2026, the situation changed. Total revenue for the quarter was 33.7 billion yuan, representing a year-on-year growth of only 3.4%, the lowest growth rate since its listing. Adjusted net profit was 3.374 billion yuan, down 26.3% year-on-year.

Advertising and livestreaming, Kuaishou's two major revenue sources, both underperformed. In 2025, online marketing services revenue was 81.462 billion yuan, up 12.5% year-on-year; livestreaming revenue was 39.1 billion yuan, with a year-on-year growth of only 5.5%. Entering the first quarter of 2026, livestreaming revenue was 8.492 billion yuan, down 13.5% year-on-year.

The sluggish growth of its core business is a reality Kuaishou has to face. Although AI is seen as its second growth curve, it is also eating into profits.

In 2026, Kuaishou's overall capital expenditure is expected to reach 26 billion yuan, an increase of about 11 billion yuan over the previous year, with almost all new investment flowing into AI computing power. In the first quarter of 2026, Kuaishou's bandwidth and server hosting costs reached 1.749 billion yuan, up 18.4% year-on-year. Depreciation and amortization surged from 1.235 billion yuan to 1.775 billion yuan, and R&D expenses hit 3.6 billion yuan, a 9.8% year-on-year increase.

With the slowdown in growth of its short-video main business and the weakening momentum of its traditional cash cow operations, the annual AI capital expenditure of 26 billion yuan requires rigid expansion. On one hand is the second growth curve Kuaishou has placed high hopes on; on the other is a capital-intensive business that continuously consumes profits. Making Keling independent may be the best choice.

Promoting Keling's independent financing is not a passive way to offload a burden, but an active breakthrough. It not only brings external funds to Keling and expands its commercial boundaries, but also allows the value of AI assets and Kuaishou itself to be re-evaluated.

In the past, within Kuaishou, Keling could only be priced according to the PE valuation logic of an internet content platform. Kuaishou is priced as a content platform in the secondary market with a price-to-sales ratio of only